Recent world events have brought most economies to a shuddering halt. Stock market prices have factored in the lack of economic activity and the huge drop in current and future profits.
Hence, it may have been a surprise to many, including me, when O2 and Virgin Media announced that they planned to merge.
The deal between Virgin Media and O2 would bring together the mobile operator’s 34m customers, the largest network in the UK, with the cable operator’s 5.3m broadband, pay-TV and mobile users. There is clearly a strategic fit between these businesses.
They will then be in a position to challenge the dominance of Sky and BT in the UK media market. It is likely to encourage more competition rather than diminish it.
Mergers & Acquisition questions are regularly tested in the papers I teach- especially ACCA AFM. As a student sitting that paper, here are 3 x questions for you to consider.
1) What are the likely synergies to arise from this merger ?
2) Which valuation method will be best to value the combined business?
3) What will the CMA consider when they decide if they should give this a red, amber or green light to proceed ?
Over to you.